May 30, 2018 / 5:49 AM / 7 months ago

UPDATE 2-S.Africa's SPAR Group eyes Sri Lanka expansion amid challenges at home

* SPAR plans two more stores in Sri Lanka

* Sales hit by weak S.Africa economy, listeria

* H1 headline earnings per share up 14 pct (Recasts with Sri Lanka expansion, shares)

By Nqobile Dludla

JOHANNESBURG, May 30 (Reuters) - South African retailer and wholesaler SPAR Group Ltd plans to open two more stores in Sri Lanka, it said on Wednesday, after warning that fuel price hikes and currency weakness could affect its home market.

In 2016, SPAR entered into a 50/50 joint venture (JV) with Ceylon Biscuits Ltd in Sri Lanka to establish SPAR SL.

SPAR SL opened its first store in a suburb of the capital Colombo in March and Chief Executive Graham O’Connor told Reuters two more stores would be opened by year end.

“(There is) strong growth, very little opposition, very fragmented market so very good opportunities,” he said.

The two additional stores will be located in Colombo, trading under the SPAR banner, group Financial Director Mark Godfrey added in an emailed response to questions.

Sri Lanka’s economy is expected to grow between 5 and 5.5 percent this year from an estimate of less than 4 percent in 2017, according to the country’s central bank.

Back home, the group expects its core Southern Africa market to be held back by fuel price increases and foreign currency changes, meaning “consumers will remain under pressure, with a constrained spending outlook.”

SPAR, which also has operations in Switzerland and Ireland, reported a 5.6 percent increase in first-half group sales to 50 billion rand ($4 billion), boosted by its European operations.

Overall sales slowed from the 12.6 percent growth the company reported a year earlier.

Sales in Southern Africa were impacted by low consumer spending due to weak economic growth and the world’s largest ever listeria outbreak, which forced retailers to remove cold meat products from their shelves. At least 200 people have died from listeria in South Africa since January 2017.

The company’s headline earnings per share rose 14 percent to 541.2 cents. Headline earnings per share is the main profit measure in South Africa and strips out certain one-off items.

SPAR shares, which had fallen by 2.4 percent over the past year, were up 2.68 percent at 1004 GMT. ($1 = 12.6534 rand) (Editing by James Macharia and Mark Potter)

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